August 9, 2019 / 8:46 AM / 10 days ago

Political crisis eases regulatory risk for Italy's Atlantia

MILAN (Reuters) - Infrastructure group Atlantia (ATL.MI) was one of the few companies listed on Milan’s main stock index to end with gains on Friday as a possible breakdown in the government reduced the chances it could lose its lucrative motorway concession.

FILE PHOTO: Controlled explosions demolish two of the pylons of the Morandi bridge almost a year since a section of the viaduct collapsed killing 43 people, in Genoa, Italy June 28, 2019. REUTERS/Massimo Pinca/File Photo

Milan’s Ftse MIB index shed nearly 2.5%, accompanied by rising sovereign bond yields, the day after Deputy Prime Minister Matteo Salvini called for snap elections.

Shares in the group controlled by the Benetton family gained 2.9% however to touch their highest in almost a month.

Atlantia’s concession to operate around 3,000 km of motorways, about half the Italian network, has been under threat from Salvini’s coalition partner 5-Star Movement since a bridge it operated in Italy collapsed last year, killing 43 people.

Salvini, leader of the far-right League, pulled the plug on the government on Thursday, diluting that threat to a business unit which brings in a third of the group’s core profit.

“The cabinet was going to approve the decree to revoke the concession in the name of social justice and (the League) has blown up the government only five days before (the ceremony for the victims),” 5-Star member and Minister for Parliamentary Relations Riccardo Fraccaro told SkyTG24 TV.

A ceremony is due to take place in Genoa on Aug. 14 to mark the first anniversary of the collapse, a disaster that shocked the country and severed a key connection between the port city and southern France.

During a fractious 14 months in government, 5-Star has accused the League of being too soft on Atlantia, which it blamed for the poor upkeep of the motorway network.

Despite 5-Star pushing hard to revoke the concession, the government was divided on the early termination of the motorway contract.

NEW GOVERNMENT

The prospect of 5-Star not being part of a new government was the positive factor behind Friday’s stock gains, said Marco Opipari financial analyst at broker Fidentiis.

“If the government resigns, the procedure for revoking the concession would be interrupted, and since it would be unlikely that 5-Star would participate in a new executive, it would be very plausible that this procedure would not be reopened,” Opipari said.

The infrastructure group and its top managers are under investigation for the bridge collapse, together with several officials of Italy’s transport ministry.

Atlantia has always denied any wrongdoing, saying regular, state-supervised inspections had indicated the viaduct was safe.

“The risks linked to the outcome of the civil and criminal trial on the collapse of the Genoa bridge would remain, but there is no doubt that Atlantia’s position would be greatly favored in its relations with a government without the 5-Star,” Opipari added

Atlantia declined comment.

5-Star has more parliamentary seats than the League, but polls say its partner now enjoys twice as much voter support.

Atlantia may also be less likely to invest in the rescue of struggling airline Alitalia [CAITLA.UL], a Milan-based trader said.

Pumping money into Alitalia, which successive Italian governments have tried and failed to return to profit, could have been seen by Atlantia as a means of improving its relationship with Rome, analysts said.

Atlantia has said it would be in its own interest to invest in Alitalia because it operates Rome’s main airport Fiumicino, which could suffer if the airline goes belly-up.

Additional reporting by Giancarlo Navach; Editing by David Holmes and Jan Harvey

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